Dairy Farmers of America (DFA) members have been informed of an unauthorized payment of $1 million – arranged by former DFA CEO Gary Hanman to former DFA chair Herman Brubaker. The payment, made in 2001 through a DFA affiliate, had not been approved by the DFA board. The affiliate was not identified. In a teleconference with dairy media on May 9, current DFA president and CEO Rick Smith said all DFA members were informed of the discovery via a May 8 letter from Smith and DFA board chair Tom Camerlo. Smith said the current board and management team became aware of the payment in the past six to eight weeks. Smith said the $1 million, plus interest totaling “hundreds of thousands of dollars,” has been paid back by Hanman and Brubaker. He said it was too early to determine if DFA would pursue criminal charges against Hanman and Brubaker, but that the co-op would reserve that right.

The DFA board established a special committee to investigate all details related to the payment, as well as any other potential unauthorized payments or activities made by Hanman, Brubaker or others. A committee report is expected in the next few months. Smith said the payment discovery was made during “due diligence” on a different matter. He said his role at DFA in the past two years has included creating “a culture of transparency,” which includes looking into past transactions. “We’re not on a witch hunt, but we’re not going to have a whitewash,” he said. Brubaker stepped down as DFA chair in 2003; Hanman retired as CEO at the end of 2005, but in a pre-existing employment agreement was technically retained as a consultant. At the time of the payment discovery, Smith said Hanman was no longer providing consulting services, and the employment agreement has been terminated. Smith said the payment should not reflect on DFA’s internal controls, “because it happened outside of DFA,” but that the special committee will also look into internal controls and systems to make sure they are adequate and consistent. The letter assured members that significant operational changes designed to ensure the long-term strength and success of the cooperative had been implemented.